As flexible and hybrid work arrangement becomes part of the new norm, more business owners are looking into exploring shared working spaces as a profitable business venture in 2025. However, starting a coworking space isn’t like starting any kind of business—membership agreements, data security, permits, liability, and intellectual property legal considerations are important factors you need to consider in order to operate a coworking space legally.
Legally starting a coworking space means prioritizing your members’ protection and privacy through contracts and agreements while also giving them the peace of mind of working in a space that complies with all the legal requirements of the local authorities.
Ready to get the engines running for your coworking space business? Here are five legal aspects you need to consider.
1. Membership Agreements
Membership agreements, or coworking agreements, are important documents that outline your duties and responsibilities as the coworking space owner and the member's duties and responsibilities while using the space.
Typically, a membership agreement outlines that you allow an individual full or limited (depending on the type and pricing of your business) access to the coworking space, including all or some amenities (like high-speed internet, private working stations, conference rooms, etc.) as provided and clearly stated in the agreement.
Here are several key points that your membership agreements should include to foster a better relationship and business with your member-customers:
1. Features and Pricing
Your membership agreement should clearly outline whether your coworking space has a tiered pricing model and the features included and excluded for each tier. It should also outline ‘pay-as-you-use’ services like photocopying and printing services to clarify that they are not included in the membership fee package.
If you don’t plan on a tiered pricing model, your membership agreement should present membership plans, all the amenities included in each fee, and the billing, payment, and renewal method. It should also include any fees imposed for late or failed payments.
Gary Hemming, Owner & Finance Director at ABC Finance, says, “Some coworking spaces, like leases, impose annual fee adjustments at a certain percentage. To avoid conflicts and misunderstandings with your members, it is important to clearly define these automatic fee adjustments in your membership agreement, especially when you plan for monthly or annual automatic membership renewals.”
2. Coworking Space Access
Your membership agreement should indicate the times and manner in which members can access your coworking space. Will they be given a keyfob to access the building or a room? Will you provide 24/7 access? Will you provide limited access during holidays or weekends?
Outlining your terms for access in the membership agreement allows your members to compare your offerings with your competitors. This is especially important since access to coworking spaces is an important consideration for many individuals regarding their work schedules.
3. Coworking Space Rules
Establishing coworking space rules will help you maintain the working environment and productivity of your members and your business facilities.
A membership agreement should indicate specific coworking space rules, including prohibited items and activities, obstruction and disturbance rules, destruction of coworking space facilities, internet rules, and many more.
4. Termination of Membership
Members should be allowed to terminate their membership when they no longer find value in your offerings. Similarly, as a business, you should also implement termination clauses when a member fails to abide by any terms in the membership agreement.
Kathryn MacDonell, CEO at Trilby Misso Lawyers, says, “A termination clause in a membership agreement should indicate the terms in which your business or a member can terminate or cancel the deal, as well as the period of notice (if any) and the refund or return of any overpayment or deposit.”
Privacy and Data Security
At their core, coworking spaces are still public spaces. One of the biggest concerns of members and a challenge for coworking space business owners is how to proactively protect their members' data security and privacy in a coworking space, especially with shared amenities like public Wi-Fi connections.
Data Security Over Open Networks
Take, for example, WiFi sniffing, where cybercriminals can use data sniffing tools to capture data, even log-in credentials when users connect to an open network or public Wi-Fi. Simply put, a hacker can come between the information you send and your connection point, stealing your data before it reaches its intended destination. In addition, cybercriminals can also spread malware over open networks.
To protect your member's data when connected to your WiFi, it is important to:
- Strengthen to enterprise-grade firewalls.
- Change passwords often.
- Offer multiple network connections, like private VLANs or VPNs.
- Ensure end-to-end encryption and security compliance.
- Use WPA2-Enterprise, instead of WPA2-PSK, authentication methods where each user gets a unique key to the network, minimizing exposure to cyber hacking.
Data Security Over Shared Space
With several individuals working in a shared space and using the same amenities, it is inevitable for confidential documents to be exposed to prying eyes. To keep data security in the coworking space and ensure each individual's privacy is protected, regularly remind your members to:
- Follow printing and photocopying guidelines, like not leaving any personal documents on amenities meant for shared use between members.
- Not to leave their space unattended, and if necessary, ensure all important documents and valuable items are safe and secure.
- Properly destroy physical data, i.e., implement a shred-all policy for documents instead of just throwing them in the garbage.
- Don’t skip on CCTV cameras—they’re your life savers if any legal evidence may be necessary.
- Provide storage locker options to keep your member’s items safe.
Zoning and Permits
Before starting any business, business owners must comply with all regulatory requirements, including relevant business permits, licenses, and zoning compliances.
“Without these permits and licenses, your business is considered illegally operating and may face closure, lockdown, and asset confiscation by government authorities, notwithstanding penalties you must pay or any lawsuit your business can face from your customers,” says Jeffrey Zhou, CEO and Founder of Fig Loans.
Here are examples of some critical regulatory compliances coworking space business owners need to secure before fully operating their business:
1. Zoning Compliances
Zoning laws help businesses comply with set rules and regulations about business operations and building standards within a specific lot or area. For example, suppose zoning laws indicate that your desired location is residential. In that case, you may be asked to find another commercial area to relocate your business unless you acquire a special permit to operate in a residential area.
“Compliance with zoning laws also ensures that your commercial business or property follows lot lines, parking, street distance, signage, and other building and lot requirements and standards set by law. Simply put, zoning laws help ensure that all business in a jurisdiction is mutually beneficial to both the business owner and the community it is in,” says Chris Aubeeluck, Head of Sales and Marketing at Osbornes Law.
2. General Business License
Requirements may vary depending on your area, but all businesses require business licenses or authority to operate with their local authorities.
A business license ensures that you have complied with requirements local authorities have set up to operate your business, which includes local zoning ordinances, contracts, registration with other government entities, relevant tax payments, safety clearances, community clearances, and the like.
3. Safety Permits
As a coworking space owner, complying with safety and health regulations is a nonnegotiable matter when starting your business. It is important to have your building and work spaces inspected by local fire authorities to ensure you comply with standard fire safety requirements. It helps ensure your business is safe from fire hazards, with all the necessary equipment to combat fire.
Liability and Insurance
Every business has risks and liabilities, especially for coworking spaces, which are communal spaces for its members. Destruction of property, whether intentional or not, as well as fire occurrence and other unforeseen circumstances, can happen in the blink of an eye, and having insurance can help the monetary burden through insurance claims.
Some of the most common insurance coworking space owners need to have to include but are not limited to:
- General liability insurance: This covers your business against common claims such as bodily injury, personal injury, or property damage.
- Commercial property insurance: Covers your commercial property against damages from fire occurrences, theft, or natural disasters
- Business income insurance: Protects your business from its lost income in the event of property damages in which your business cannot operate.
- Worker’s compensation insurance: This covers medical and wage benefits for your employees who suffer injury at work.
- Data breach insurance: protects your business from damages caused by a data breach.
Reyansh Mestry, Head of Marketing at TopSource Worldwide, says, “Property and medical damages can take a toll on your business cash flow without proper insurance. Some business owners may think they’re unnecessary costs, but accidents and disasters happen unexpectedly, and these insurances are your safety net to protect your business and keep it running for a long time.”
Intellectual Property Concerns
As coworking spaces gain traction, some business owners are also raising eyebrows about how they protect their members' intellectual property, trade secrets, or confidential data that may be accessible or visible through cameras and data breaches within the coworking space.
A coworking space, typically designed as an open office, can be a collaborative hub for many small businesses. However, it raises issues about protecting each business’s intellectual and physical property.
While members should exercise caution when publicly exposing sensitive information in an open space like coworking spaces, it is also your responsibility as an owner to ensure that your members feel safe and secure about their privacy and business secrets.
Generate recurring revenue and offer exceptional customer experience at your shared or coworking space
Some of the measures you can take include:
- Establish confidentiality and non-disclosure agreement clauses in your membership agreements. These clauses bind all members to confidentiality agreements regarding any sensitive information they may find within the space. They are not allowed to divulge or use this information in any way for themselves or for a third party.
- Soundproof meeting and conference rooms, such as acoustic panels, can help keep confidential business ideas within a team.
- Have coworking space employees sign non-disclosure agreements, as they have the most access to business CCTVs and amenities that may be prone to confidential intellectual property and business data.
Final Thoughts
With more individuals leaning towards flexible working arrangements and small business owners opting for shared spaces to save costs, coworking spaces are gaining more traction now than ever, especially as a profitable business model.
Check out coworking space trends 2025
However, it is essential to consider all the legal requirements a coworking space needs, including membership agreements, privacy, data and intellectual property protection, zoning and business permits, and relevant insurance protection.
These legal aspects are not only requirements for a business to operate legally, but they also demonstrate your business’s commitment to prioritize the protection of your members and their sensitive data while they are in your shared workspace.
